Taiwan’s stock market on the 6th logged the largest intraday point drop in its history, and the Taiwan dollar briefly lost the NT$33 integer mark against the U.S. dollar intraday, touching a low of NT$33.04 before rebounding on heavy exporter selling to close at NT$32.768, up 1.08 jiao and snapping a four-session losing streak. Yet the single-day rebound could not mask the week’s weakness: the Taiwan dollar still fell 2.9 jiao for the week and was down 3.2% for the year through the end of October, the worst performer among major Asian currencies.
More noteworthy than the currency’s swings is a structural shift. Taiwan’s Central Bank statistics show that at the end of September, foreign investors’ holdings of Taiwanese stocks, bonds and Taiwan dollar deposits totaled $1.9272 trillion (about NT$63.1 trillion), equivalent to 321% of foreign exchange reserves, with both the asset size and the ratio setting record highs. By the end of October, the figure had eased to $1.7426 trillion (about NT$57.1 trillion) as the Taiwan stock market fluctuated, but it was still equal to 292% of reserves, approaching three times that level.
Lin Chi-chao, chief economist at Cathay United Bank, said the rapid swelling of the Taiwan stock market’s capitalization and the simultaneous rise in foreign ownership are the core reasons the central bank’s task of stabilizing the currency has become so much harder. He noted that foreign ownership of the Taiwan stock market has risen from about 43% to nearly 50% at one point, and with such a huge asset base, a mere 1% adjustment in foreign investors’ portfolios now moves a volume of capital far beyond what was seen in the past, visibly amplifying exchange-rate volatility.
Stocks and Currency Fall Together; Exporter Selling Powers the Rebound
The trigger for this round of stock and currency turmoil was the outcome of the U.S. Midterm Elections. After the Democrats’ landslide, the market feared the artificial intelligence (AI) industry would face stricter regulation, and a wave of selling swept global technology stocks. Taiwan’s weighted stock index plunged 3,737.67 points intraday on the 6th, the largest intraday point drop on record, before closing down 1,873.08 points at 39,701.64 — the fourth-largest closing drop in history — and marking a seventh straight losing session.
The currency market opened under the weight of the stock rout, with the Taiwan dollar swiftly breaking through the NT$33 mark to a more than one-and-a-half-year intraday low, but it returned to the NT$32 level by the morning and, in the afternoon, surged as far as NT$32.702 as exporters rushed in to sell dollars. Combined turnover in the Taipei and Yuan Tai foreign exchange markets totaled $3.156 billion (about NT$100 billion).
Tsai Chiung-min, director-general of Taiwan’s Central Bank’s Foreign Exchange Department, had earlier suggested exporters reassess Federal Reserve policy and U.S. dollar trends after the U.S. Midterm Elections, and said those with genuine dollar needs should convert in tranches early. Foreign exchange traders observed that the central bank’s rare on the 5th urging exporters to “stop waiting,” combined with the exchange rate having reached what exporters saw as a sweet spot, unleashed a full burst of dollar selling that produced the Taiwan dollar’s sharp rebound.
According to Taiwan’s Central Bank statistics, as of 4 p.m. on the 6th the U.S. dollar index was up 0.44%, the South Korean won and the Singapore dollar were down 1.02% and 0.32% respectively, while the Taiwan dollar and the Japanese yen were up 0.33% and 0.16%, a clear divergence among major Asian currencies that day.
Taiwan and South Korea Both Face Foreign Selling, Yet Their Currencies Diverge
It is worth noting that Taiwan and South Korea have both benefited this year from the AI boom and sharp stock market gains, and both have faced massive foreign selling pressure, yet through the end of October the Taiwan dollar had tumbled 3.2% while the South Korean won had risen 8.38% — a starkly different picture.
Lin Chi-chao analyzed that three forces underpin the won’s relative strength. First, memory giants such as Samsung and SK Hynix have posted strong profits and aggressively expanded domestic capital spending, prompting companies to repatriate overseas funds. Second, South Korea’s bond market is of a certain scale, and foreign investors have kept buying Korean bonds, generating capital inflows. Third, the market expects South Korea’s central bank to keep raising interest rates, enhancing the appeal of won-denominated assets.
By contrast, Taiwan, despite benefiting from AI demand and brisk semiconductor exports and posting record after record in trade and current-account surpluses, has seen a pattern of “larger surpluses but a smaller share repatriated.” Lin Chi-chao noted that technology giants have stepped up overseas investment, limiting the volume of funds brought home, a major factor behind the Taiwan dollar’s depreciation this year.
Taiwan’s Central Bank Governor Yang Chin-long, responding earlier at the Legislative Yuan to questions about the Taiwan dollar’s weakness versus the won, said large South Korean companies actively raise funds through overseas capital markets, driving cross-border capital flows, while Taiwan’s economic fundamentals have been solid since 2016, with the economy, financial system and exchange rate all quite stable, and foreign investors have deeper confidence in and greater exposure to the Taiwan stock market.
Foreign Capital Flows Swell; Currency Market Enters a New Era of Record Volume
The scale of foreign capital flows is evident from turnover data. On October 15, foreign investors set a record single-day net sell of NT$302.555 billion (approximately $9.2 billion) in Taiwan stocks; the Taiwan stock market closed down 1,655.96 points that day, and combined turnover in the Taipei and Yuan Tai foreign exchange markets soared to $9.115 billion (about NT$300 billion), a record that left far behind the old mark of $5.561 billion (about NT$180 billion) set in March 2008 when Ma Ying-jeou was elected president. Of the top ten daily turnover records in Taiwan’s foreign exchange market, seven occurred in 2026 alone, showing the market has entered a “new era of record volume.”
Facing hot money flowing in and out, Taiwan’s Central Bank has recently diversified its adjustment tools: besides actual intraday intervention and end-of-day pricing, it has adjusted dollar supply and demand through government-owned banks and relaxed limits on exporters’ daily foreign exchange settlements, effectively enlisting exporters to help stabilize the currency. Foreign exchange traders observed that the central bank’s intraday intervention has indeed strengthened, but it has shown no intent to defend a specific price level, mainly seeking to cushion rapid one-way exchange-rate moves by providing liquidity.
Lin Chi-chao said bluntly that if Taiwan’s Central Bank were to deploy foreign exchange reserves single-mindedly to forcefully resist depreciation, it would not only burn through its ammunition but likely achieve limited effect against the flood of capital; better to make good use of market mechanisms and guide exporters with genuine needs to settle in tranches. From a supply-and-demand perspective, greater willingness among exporters to sell dollars increases dollar supply in the market and helps ease depreciation pressure on the Taiwan dollar.
Signs of a Near-Term Pause in Depreciation; a Trend Reversal Still Awaits
The market is watching whether the Taiwan dollar is showing signs of halting its decline. Foreign exchange expert Li Chi-Chan believes the Taiwan stock market’s long lower shadow on the 6th, with turnover expanding to more than NT$1.2 trillion (approximately $36.6 billion), amounts to a strong counterattack, and with foreign net selling narrowing to under NT$100 billion — at NT$91.188 billion (approximately $2.8 billion) — this can be seen as a positive signal; but for the currency market, at this stage one can only hope for a pause in depreciation, and talk of a rebound is still a long way off.
Foreign exchange traders cautioned that the narrowing of foreign net selling cannot rule out the possibility that some stocks hit their daily limit down, leaving foreign investors “wanting to sell but unable to,” so the selling pressure may not have truly abated, and next week it will still be necessary to watch whether foreign capital outflows continue. The person also noted that the sharp slump reflects market doubts about the AI industry’s outlook, concerns that will take time to digest, and that the Taiwan dollar is unlikely to escape a weak bias in the near term, with the extent of depreciation pressure depending on the tug-of-war between foreign outflows and exporter selling.
Li Chi-Chan identified two key indicators to watch: first, foreign investors shifting from consecutive net selling to sustained net buying, which would support the exchange rate; second, a pullback in the U.S. dollar index — for example, cooling U.S. inflation or diminished expectations of Federal Reserve rate hikes — either of which would help ease depreciation pressure on the Taiwan dollar. But judging from the recent market mood, those conditions may be hard to meet in the short term.
Lin Chi-chao, meanwhile, flagged the reverse risk. He argued that “the AI story won’t end this year,” and once market doubts fade and foreign capital floods back in, the Taiwan dollar could swing from sharp depreciation to sharp appreciation, at which point Taiwan’s Central Bank would face not only resisting depreciation — rapid appreciation would likewise raise the difficulty of stabilizing the exchange rate. For corporate chief financial officers, if they hold ample U.S. dollars and have no urgent payment needs in the short term, with the Taiwan dollar having weakened to a relatively favorable level, timely settlement is a reasonable choice for cash scheduling.
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